Karachi, March 5, 2024 – The Ministry of Commerce in Pakistan has intensified efforts to address the liquidity challenges faced by the textile industry, a key sector in the country, by gathering details of outstanding tax refunds and drawbacks.
(more…)Tag: refunds
-
Chartered Accountants Demand KIBOR+3% for Delayed Refund Payments
Chartered Accountants in Pakistan have raised concerns over the delayed refund payments by the Federal Board of Revenue (FBR). The Institute of Chartered Accountants of Pakistan (ICAP) has proposed that the FBR should pay interest at the Karachi Interbank Offered Rate (KIBOR) plus 3 percent for delayed refunds.
(more…) -
FBR issues rules for centralized payment of income tax refunds
ISLAMABAD: The Federal Board of Revenue (FBR) on Friday announced the issuance of draft rules for the centralized payment of income tax refunds. The FBR released SRO 1239(I)/2020, proposing amendments to the Income Tax Rules, 2002, aimed at streamlining the refund process and enhancing transparency.
(more…) -
FBR sets up cell to probe bogus refund claims
ISLAMABAD: Federal Board of Revenue (FBR) has established a cell to probe fake refund claims in order to make system transparent.
In an official order issued on Thursday, the FBR said that to streamline the payment of refund claims and to initiate enforcement measures to minimize the risk of inadmissible refund claims, a system based Post Refund Analysis Cell (PRAC) had been established at FBR headquarter.
The cell has been established to ensure validity and appropriateness of refunds sanctioned through FASTER and ERS systems.
The FBR said since refund processing system has been programmed in auto-mode without human involvement, PRAC has been aimed at bringing transparency and further clarity in automated refund system by restricting the inadmissible claims centrally at the national level.
PRAC will work as per set SOPs/mandate to thoroughly scrutinize issues pertaining to inadmissible/excess/not warranted refunds.
Functions of PRAC shall include:
(i) To identify the cases of inadmissible refunds; and
(ii) To analyze the cases of inadmissible/excess refund claims and in particular, cases where there are suspicions of; (a) refund claimed on the strength of fake/flying invoices; (b) refund claimed on inadmissible inputs including building materials, paints wires and cables, vehicles and other such items which are restricted under the provisions of Section 8 of the Sales Tax Act, 1990; (c) falsification of documents with the intent to deliberately disguise the nature of transactions; (d) collusion amongst taxpayers to avail the bogus refunds.
The FBR said that where a fiscal investigation is required, the matter will be referred to the concerned LTO/CTO/MTO/RTO as the case may be with a report from PRAC.
The concerned field officers will be responsible to thoroughly scrutinize the observations including any other observation which in the opinion of the concerned officers is deemed necessary to ascertain the genuineness of the claim.
However, the officer posted in the cell will:
(a) Arrange and elaborate the facts indicating the commission of offence/crime’
(b) Chronology of events, primary and secondary evidences to establish the offence;
(c) List of documentary evidences including the positions, submissions to prove the offence; and
(d) Any other facts or evidence to establish the offence.
The officers posted in PRAC after completion of the analysis would submit the report regarding the assigned matters to Chief (IR-Analysis) at the earliest or within the time stipulated who will forward the said report to concerned field offices after the approval of the Member – IR Operations.
The PRAC has started its function from October 01, 2020.
-
FBR admits Rs232 billion payable as income, sales tax refunds
ISLAMABAD: Federal Board of Revenue (FBR) on Monday admitted to pay an amount around Rs232 billion as sales tax and income tax refunds to taxpayers.
The FBR disclosed the amount of payable refunds at a meeting that was chaired by Dr. Abdul Hafeez Shaikh, Adviser to the Prime Minister on Finance and Revenue.
Muhammad Hammad Azhar, Federal Minister of Industries and Production, Muhammad Azam Khan Swati, Minister of Parliamentary Affairs, Abdul Razak Dawood, Adviser for Commerce, Textile and Investment, Naveed Kamran Baloch, Faizullah Kamoka, Secretary Finance and Chairman FBR Muhammad Javed Ghani were also present in the meeting.
Dr. Muhammad Ashfaq Ahmed, Member (IR-Operaions), FBR made a presentation on the issue of refunds.
“The meeting was informed that a total of Rs142 billion of Sales Tax refunds were pending and Rs90 billion of Income Tax refunds were due for payment.”
The Member also informed the Ministers that export sector had been prioritized and an unprecedented amount of Rs.106 billion had been released to them. It was also explained that during 2020, fresh inflows and refund claims had matched the outflows and a total amount of refund released under the head Sales Tax was Rs.154 billion.
In order to further facilitate the business community and to resolve their day to day issues on priority, it was advised that a technical committee having representatives of the business community be formed to examine and resolve faster refund related issues. It was also decided that there will be facilitation committees at field office level so that businessmen are able to have their issues resolved at local level.
It was also decided that a complaint cell be constituted where businessmen lodge their complaints and the complaint cell may pursue the complaints for resolution.
FBR was also advised to increase its public outreach and hold frequent meetings / media conferences and video conferences with trade associations to hear their viewpoint and issues relating to tax matters.
It was noted that withholding tax regime increased the cost of doing business and FBR was advised to examine reducing the regime in the coming budget.
Similarly the legal provisions relating to capping input tax adjustment at 90percent of payable tax in terms of section 8B of the Sales Tax Act were also proposed to be examined in the forthcoming budget exercise.
Discussing the tax refunds, FBR was advised to focus on pending refunds of both export and non-export sector to give a business stimulus and easy cash flows in the post Covid scenario.
Further enhancing the stimulus package, FBR was advised to pay Income Tax refunds up to Rs50 million each within one week for which FBR will be provided funds by the Finance Division.
In order to ensure steady disbursement of refunds, it was also proposed that FBR may examine creating a refund fund from where Income Tax refunds relating to previous years may be paid in routine without hurting collection till the time all the pending refunds are liquidated.
In juxtaposition to speedy regular disbursal of refunds with faster running in automated mode the importance of post refund audit to counter menace of flying invoices was proposed.
FBR’s efforts on zero tolerance against corruption were appreciated and FBR was advised to highlight its good initiates including fight against corruption on media as well as on its websites.
-
RTO-III Karachi assures exporters of resolving pending issues on priority
KARACHI: Dr. Amir Ali Khan Talpur, Chief Commissioner Inland Revenue, Regional Tax Office (RTO)-III, Karachi has assured the exporters of resolving pending issues on priority basis.
(more…) -
Hafeez Shaikh directs FBR to pay income tax refunds of up to Rs50 million
KARACHI: Dr Abdul Hafeez Shaikh, Adviser to the Prime Minister on Finance and Revenue on Thursday directed Federal Board of Revenue (FBR) to make payment of all income tax refunds of up to Rs 50 million in the next couple of weeks.
(more…) -
Exporters doubt refund payment release on FBR collection failure
KARACHI: Exporters expressed concerns that their liquidity may be taken away by the government in shape of sales tax worth billions of rupees as Federal Board of Revenue (FBR) has failed to achieve its revenue collection target.
Mian Anjum Nisar, President, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) said that the exporters fear that their precious liquidity taken away by the government in shape of sales tax worth billions of rupees which is completely stuck up and refunds may be excessively delayed because the FBR has also failed to achieve its revenue collection target.
FPCCI chief held a comprehensive detailed meeting with the leading export oriented sector at PHMA House, Karachi with Muhammad Jawed Bilwani, Chairman, Pakistan Apparel Forum and urged the Government to honour its commitment with the export sector.
The President, FPCCI said that the exporters are in real fixed and under stress as Government is not implementing the decision it has taken to support export oriented sector.
The Advisor to Prime Minister on Finance promised that the refunds will not get stuck up whereby he and his team have made a commitment that after passing of budget, his team will hold meetings with exporters and devise an automated system like in Bangladesh or China.
Through the automated system, exporters will get a major amount from bank or the State Bank and would not be dependent on the FBR. Advisor Finance promised that if the new refund system will not work, the govt. will revisit its decision in 3-6 month period. Since more than 8 months have been passed and the FBR FASTER system has failed for speedy refunds, therefore, the Govt. should honour their commitment and restore zero rating – No Payment No Refund Regime for the export sectors.
President FPCCI further told that the Govt. has failed to refund sales tax claims under FASTER System of textile exporters as per commitment, to refund claim amount in 72 hours, contrarily the Govt. has not paid exporters’ claims for the last seven months.
Approx. Rs100 billion of textile exporters liquidity held up under FASTER Refund System in last 8 months and total Rs210 billion are withheld with the government.
Payment timeline for payment of Customs Rebate claims which previously reduced to 7 months has again been prolonged to 13 months.
However, Government also committed that Customs Rebate, DLTL claims will also be paid electronically along with export proceeds.
Reportedly, hundreds of exporters SMEs have stopped their production owing to liquidity problems who have not received their sales tax refund claims for last seven months and due to high rates of utilities shall be compelled for closure if their sales tax refunds are not released on immediate basis and utility tariffs are not rationalized to facilitate them to get new orders and resume production.
The President FPCCI emphasized to implement power tariff of 7.5 cents/kwh including all charges across Pakistan including Karachi and RLNG at 6.5 dollars/MMBTU.
President also mentioned that while notification of said tariffs was issued the time period inadvertently was missing, it should be for three years period as agreed.
He further informed that the OGRA has separated zero rated industry from general industry for Gas Tariff while NEPRA is still not implementing the decisions of separate treatment for zero rated and general industry.
Mian Anjum Nisar President FPCCI said that the tariff for electricity and gas should be fixed on yearly basis for the Export Oriented Sectors and Priority be given only to these sector as the Export Sectors have to make commitments to their buyers for 6 months in advance and frequent increase in the electricity and gas tariffs jeopardizes their entire planning and they suffer huge losses to keep up commitments to their foreign buyers.
-
FPCCI demands immediate release of Rs250 billion tax refunds
KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Tuesday demanded the government to release Rs250 tax refunds of exporters without any further delay.
FPCCI President Mian Anjum Nisar urged the Prime Minister of Pakistan Imran Khan and Advisor to the Prime Minister on Finance to honour their commitment of disbursing sales tax refunds within 72 hours of submission of the claims.
He informed that according to the exporters’ associations of Pakistan the stuck-up refunds claims of sales tax, income tax and duty drawback of five export-oriented industrial sectors – Textile, Leather, Carpet, Sports Goods and Surgical Goods- have reached to the tune of around Rs.250 billion whereas the FBR has also acknowledged the amount as Rs.200 billion.
However, out of the total amount of Rs.250 billion, sales tax pending refunds are around Rs. 125 billion and the rest amount of over Rs. 120 billion is stuck-up on account of duty drawback on local taxes (DLTL) and customs rebates. Whereas only Rs.103 billion have been released so far.
President FPCCI said that the number of sales tax refunds cases have been considerably increased after imposition of 17 percent sales tax on domestic supply chain of five leading export-oriented sectors and the government has failed to refund sales tax claim amount under FASTER system within 72 hours, rather Government has not paid exporters’ claims for the last several months.
He apprehended that if the government does not realize the gravity of situation and exporter’s refunds are not released on war footing basis, the export sector will completely collapse leading to huge unemployment in the country.
Mian Anjum Nisar said that the export is largely a function of industrial production, whereas large scale industry registered a negative growth of 6.45 percent during the first four months of the fiscal year 2020-21, therefore, exports have also registered a meager 3.2 percent growth during the first half of the year. Pakistan’s exports are stuck-up around $ 23 billion range since last year.
He apprehended that FBR’s strict policy would completely hurt the value added export sectors and therefore, urged the government to take all necessary steps to release payments of pending refund claims to the exporters immediately and restore zero rating of sales tax that is no payment no refund regime.
-
FBR conducts audit of all refund cases
ISLAMABAD: Federal Board of Revenue (FBR) on Tuesday said that the tax machinery conducts audit of all refund cases.
“It is baseless to assume that FBR does not conduct the scrutiny. The processing of the case may take time but it is certain that all refund cases are audited,” the FBR said.
In this regard, the FBR issued a clarification on the news aired on electronic media about the issuance of fake refunds.
FBR has explained that two processes are being used to deal with refund cases.
The first is the processing of refunds through automated system for the exporters.
In this process, the audit of the refund is conducted after the issuance of refunds.
The other system of refund issuance has been devised for the taxpayers not associated with the export sector.
The refunds issued through this mode are called the “carry forward refunds.” Such refunds are issued once in a year. The audit is conducted before the issuance of such refunds.
FBR has clarified that taxpayers involved in presenting the wrong invoices are dealt strictly and recovery is made from them.
Moreover, penalty and default surcharge is also imposed to curb this practice.
Sometimes, the audit process of refunds takes longer period of time which may cause problem of liquidity for the exporter, in case of delayed issuance of refunds.
To avert liquidity crunch for the businesses, the refunds are issued and the scrutiny is conducted afterwards.
There are certain inbuilt checks within the system to match the input claim by one person with output claim by another person.
To avoid revenue loss, FBR has almost resolved the issue of fake invoices. Sometimes, it becomes a little cumbersome and lengthy to check the flying invoices but the scrutiny is conducted in all the cases. FBR has computer analytics system of CREST.